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Ageing population and pension system sustainability: reforms and redistributive implications

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  • Davide Bazzana

    (Università degli Studi di Brescia)

Abstract

The paper presents an agent-based model developed to investigate the relationship between retirement age and pension system sustainability taking into account the redistributive implication. Moreover, we investigate the role that the government can play in reducing inequality by implementing debt stabilisation policies, as for example applying a property tax. Results show that delaying the retirement age is an effective policy to raise the pension scheme sustainability. However, there is an emerging trade-off between the pension system sustainability and the extension of the pension benefits that may have intergenerational implications. Pension reforms which reduce the pension age threshold or increase the paid benefit will rise the overall pension expenditure and will negatively affect the public debt evolution which may require some stabilisation measures, as the implementation of positive property taxation. The effects of the property taxation on the debt reduction and the level of equality in the population’s wealth distribution strongly depends on the progressivity of the measure and on the size of the taxpayer population involved. The analysis evidences the crucial role played by the age dependency ratio both in achieving the pension system sustainability and in assuring the wealth distribution within the population.

Suggested Citation

  • Davide Bazzana, 2020. "Ageing population and pension system sustainability: reforms and redistributive implications," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(3), pages 971-992, October.
  • Handle: RePEc:spr:epolit:v:37:y:2020:i:3:d:10.1007_s40888-020-00183-8
    DOI: 10.1007/s40888-020-00183-8
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    More about this item

    Keywords

    Pension system reform; Ageing; Fiscal sustainability; Inequality; Pay-as-you-go; Heterogeneity;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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